Mojo - November 2005

In Slate yesterday, Daniel Gross argued that Bush's Tax Commission will probably recommend to cap the mortgage-interest deduction, and if it does, it will hurt blue-staters more than red-staters.

Who has the most to lose if the mortgage deduction is capped at $313,000, and if you can no longer deduct local taxes from your taxable federal income? People who live in places where (a) real estate is expensive; (b) states and/or cities tax income; and (c) property taxes are high, to support local schools and services. In other words, people who live in California, Seattle, the entire Atlantic seaboard from Maryland up to Maine, and well-off suburbs of Chicago. If you live in a $300,000 McMansion in a state with no income tax, like, say, Texas or Wyoming, these changes aren't likely to affect you at all. But if you just bought a $700,000 house in Takoma Park, Md., you're screwed three ways.

Eh, my guess is that Bush wouldn't actually take up this recommendation. The real question he'll want to ask himself is whether it will hurt Democratic voters more than Republican voters. And that's not clear. The myth dies hard that the only people who votes Democratic are the ultra-wealthy, latte-swilling blue-state liberal "elite," but ultimately, anyone who can afford a $700,000 McMansion is more likely to have supported Bush than Kerry in 2004.

Look at the 2004 exit polls: the only state where the upper classesmaking over $100,000, saybroke clearly for Kerry were: Maryland, Hawaii, Illinois, Maine, Rhode Island, Vermont, Washington. And even those states still had thousands of wealthy Bush voters who will be hit by the mortgage-interest cap. Meanwhile, the well-off in New Jersey, New York, Massachusetts, and Oregon all went for Kerry in the aggregate, but once you get to the $200,000 threshold, they're voting unambiguously for Bush. California's an interesting case because the 10 percent of voters making over $150,000 chose Bush, 60-40, but the 14 percent making $100,000 went for Kerry, 60-40. Why the stark difference, I don't know. The same goes for New Hampshire. But in both states, same dealthe top percentiles, mostly Bush supporters, will be hit hardest by the cap. (Washington, by the way, is the one true latte liberal stateeven among those making over $200,000, they went for Kerry 64-36! Accept no substitutions.)

Or look at it this way. Of the top ten most expensive zip codes in the United States (list here), only the Gold Coast of Chicago gave more to Kerry, and it was close$402,000 as compared to $321,000 for Bush, according to OpenSecrets.org. The rest were big, big Bush donors, except Sagaponack, NY, which really, didn't give all that much to anyone, besides a few thousand to the DNC. Even the 90210 zip codewhich didn't make the cut but has a few rich people here and thereraised $487,000 for Bush in 2004, only slightly less than for Kerry. The Upper East Siders in Manhattan really enjoys their lattes, but they raised over $1 million for Bush.

At any rate, any sort of progressive tax hike is necessary and good at this point; but I doubt the White House sees things the same way. The cap on mortgage-interest deduction will hurt a lot of Democratic votersespecially some middle-class Democratic voters who happen to have expensive homes. But where, pray tell, does Bush think his true supportersthe ones who pull the purse-stringslive? They don't live in Wyoming or Arkansas. They live in the blue states: Connecticut, Maryland, New York. Probably not Washington, but the rest of them. And they all have nice houses.